Debswana anchors De Beers' output jump
Brian Benza | Tuesday February 4, 2014 15:16
According to an Anglo American fourth quarter production report, a recovery at Jwaneng mine coupled with better grades recovered at Orapa mine drove Debswana’s carat output 17% up in the period. De Beers is 85% owned by Anglo American. In 2013, its production rose 12% to 31.2 million carats with 70% of its output coming from Botswana. South Africa, Namibia and Canada contributed the rest. “In the fourth quarter, production increased by 13% to 9.1 million carats, mainly attributable to the Debswana operations, with Jwaneng increasing production following the slope failure in 2012, and higher grades at Orapa. Production also increased in South Africa and Canada, on account of improved grades at Venetia and Snap Lake.
In the fourth quarter, production at Debswana increased by 17% compared to third quarter 2013 with the return to operation of the Orapa One plant following unplanned maintenance in third quarter.
“Production at Venetia improved significantly, up 57% on account of higher volumes and grades following the recovery from pit flooding earlier in the year,” reads the report.
Both De Beers and Debswana are yet to provide the 2014 production forecast. From a high of 34 million carats in 2007, diamond production, which contributes just under 30% to Botswana GDP and 65% to foreign exchange receipts, has plateaued in the last few years as Debswana caps production to match weakening market conditions.
Speaking recently at a dinner held in Gaborone to mark the launch of the 2014 sales season, De Beers group CEO, Philippe Mellier said there is a positive outlook for diamond sales this year after lukewarm demand last year. Mellier said there are good signs coming from the US economy, with improved demand in evidence over the holiday period.
“Looking east to China, there are also healthy signs with a positive outlook for sales around Chinese New Year and expectations for a continuation of strong economic growth, at around the same level seen in 2013,” he said. He warned that despite solid prospects for India in 2014, there remain some concerns about inflation and currency volatility in the short term.
The top two largest players in the industry, Alrosa and De Beers raised prices in the January sales reflecting an improved demand trend. The De Beers January sight closed with an estimated value of $700 million as the company raised prices by five percent on average.
According to Rapaport, the price hike affected most categories, while the company also adjusted assortments in its boxes.
Rough demand from the secondary market improved in January with solid premiums emerging on De Beers’s boxes.
Rough prices are inclined to increase in the first quarter, as cutters need rough to churn their factories and satisfy post-holiday season demand. “While polished prices simultaneously rise, due to retailers replenishing the inventory they sold during the busy shopping period, the increases tend not to keep pace with rough.
The rough market stays strong until around April, when disappointment sets in that the polished market couldn’t keep up and trading subsequently cools,” says Rapaport in a market commentary.